The Impact of State Tax Subsidies for Private Long-Term Care Insurance on Coverage and Medicaid Expenditures

Gopi Goda

No 16406, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In spite of the large expected costs of needing long-term care, only 10-12 percent of the elderly population has private insurance coverage. Medicaid, which provides means-tested public assistance and pays for almost half of long-term care costs, spends more than $100 billion annually on long-term care. In this paper, I exploit variation in the adoption and generosity of state tax subsidies for private long-term care insurance to determine whether tax subsidies increase private coverage and reduce Medicaid's costs for long-term care. The results indicate that the average tax subsidy raises coverage rates by 2.7 percentage points, or 28 percent. However, the response is concentrated among high income and asset-rich individuals, populations with low probabilities of relying on Medicaid. Simulations suggest each dollar of state tax expenditure produces approximately $0.84 in Medicaid savings, over half of which funnels to the federal government.

JEL-codes: G22 H31 H51 H71 H75 I11 I18 I38 J14 (search for similar items in EconPapers)
Date: 2010-09
Note: AG EH PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Goda, Gopi Shah, 2011. "The impact of state tax subsidies for private long-term care insurance on coverage and Medicaid expenditures," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 744-757, August.
Published as Goda, Gopi Shah, 2011. "The impact of state tax subsidies for private long-term care insurance on coverage and Medicaid expenditures," Journal of Public Economics, Elsevier, vol. 95(7), pages 744-757.

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Journal Article: The impact of state tax subsidies for private long-term care insurance on coverage and Medicaid expenditures (2011)
Journal Article: The impact of state tax subsidies for private long-term care insurance on coverage and Medicaid expenditures (2011)
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